2023 Sales Opportunities

Small Businesses are California’s Economic Engine

Opportunity for brokers continues to grow

What do brokers need to know about Small Business in California?

California’s dominance in many economic areas is based, in part, on the significant role small businesses play in the state’s $3.2 trillion economy. Two studies, one by the U.S. Census Bureau and another by the Kaufman Foundation, found that net job growth was strongest among businesses with less than 20 employees. Among other advantages, small businesses are crucial to the state’s international competitiveness and are an important means for dispersing the positive economic impacts of trade within the California economy.

  • Non-employer businesses are the single largest segment in California, 3.4 million out of an estimated 4.4 million firms in 2018, representing over $189.3 billion in revenues with the highest number of businesses in the professional, scientific, and technical services industry sector.  
  • As these non-employer businesses grow, they continue to serve as an important component of California’s dynamic economy. 
  • Excluding sole proprietorships, businesses with less than 20 employees comprise over 88% of all businesses and employ approximately 18.2% of all workers.  
  • Businesses with less than 100 employees represent 97% of all businesses and employ nearly 36% of all workers.  

This is a link  to a chart showing additional information on the size of California businesses based on number of employees. These non-employer and small employer firms create jobs, generate taxes, support important industry sectors, and revitalize communities. [And need health and ancillary insurance to attract and keep workers!]

Over the past decades, these businesses have become increasingly important because of their ability to be more flexible and suited to niche foreign and domestic market needs. However, their small size also results in certain market challenges, including having difficulty in meeting the procedural requirements of the state’s complex regulatory structure and the traditional credit and collateral requirements of mainstream financial institutions. Specialized technical assistance, access to credit enhancements, and targeting of state procurement activities help many small businesses overcome or at least minimize these difficulties.

Additional information on small businesses can be found in the JEDE Small Business Briefing. Here is a link to California small business “Quick-Start” guides. Additional information on the activities of the Office of the Small Business Advocate can be found at this link.

Access to capital is a challenge 

In today’s financial environment, small businesses and start-ups face many challenges including accessing sufficient capital to meet day-to-day expenses and longer-term investments in marketing, new equipment and other business expansion requirements. California currently provides several loan and loan guarantee programs including the California Capital Access Program (CalCAP), administered through the California Pollution Control Financing Authority, and the Small Business Loan Guarantee Program, administered through the California Infrastructure and Economic Development Bank and a statewide network of small business financial development corporations

  •     In 2020, 11 participating lenders enrolled 860 small business loans in CalCAP, down from 2,271 loans in 2017.  
  •     The top three participating lenders — Opportunity Fund, Murphy Bank, and Working Solutions CDFI — enrolled approximately 81% of the total loan volume.  
  •     2020 program activity included $23.9 million in total enrolled loan dollars. The average size of enrolled loans in 2020 was $39,087.  
  •     Of the 860 loans enrolled in CalCAP, 334 (38.8%) were located in a severely affected communities.  
  •     Overall enrolled loans came from businesses located in 41 of the state’s 58 counties.  
  •     In 2020, CalCAP enrolled loans helped to create 960 new jobs and retain 3,279 existing jobs.  
  •     Of the 860 total loans made in 2020, 690 were microloans representing $10.9 million (over 45% of all enrolled loans). 
  • The 2020 CalCAP annual report is available through this link (https://bit.ly/3VyjLzg).

Borrower Demographics:

  •     Just over 50% of borrowers self identified as a minority-owned businesses, including 18.9% Hispanic, 18.9% Asian/Pacific Islander, 6.6% Black, and 5.2% Other.
  •     31.3% of the borrowers self-identified as female-owned businesses (17.3%) or jointly owned-businesses (14%) and with 68% of the borrowers self identified as male-owned businesses.

Excerpted from the State Assembly website: ajed.assembly.ca.gov/reports